Wholesaling residential or self-storage investing?
Commercial Real Estate Agent · Nashville, TN · Member since 2014 · 9 posts · 3 votes
Hello everyone,
My name is James Moore and I am a newbie in real estate investing, but very interested. I am currently deciding on a direction to take in real estate with my general goal being to invest in assets and generate passive income. I'm attracted to the idea of wholesaling residential properties because it sounds like it does not require large sums of capital and I could do this in addition to my full-time job. I figure proceeds could be used to help pay down my student debt. However, I am also intrigued by the idea of self-storage investing in the long run, although it sounds like this type of project is more involved and requires more capital.
Do you have advice for a newbie interested in either wholesaling residential properties or learning more about self-storage investing? What do you think are the pros and cons of following one path vs. the other? It sounds like the financial gains may be quicker with wholesaling, but I find the self-storage concept appealing. Is there a good book that describes how to invest in self-storage?
Thank you!
Thank you! This is an excellent breakdown of what I was thinking. I really appreciate your input. I don't have $250k cash right now, so wholesaling may be a better short-term goal, while self-storage could be a longer-term goal.
Wholesaling is a great way to build up some cash. I've only wholesaled one deal and no longer do residential investing but its a great way to learn a market and build some cash and credibility. Realistically, you will need some cash to get into a "meaningful" storage facility. Meaningful= lose your day job type of facility. But you certainly don't need $250K to buy and profit big time off storage. I own two facilities. The first I bought in 2011 for $350K including closing costs. Got a mortgage and some private funds and my cash infusion was 40K. That facility is now worth $1.4 Million and cash flows around $100K annually. I closed on a second facility last week. Purchase price was $350K plus $50K in repairs and upgrades and 20K in closing costs. Total acquisition was $420K. It appraised as is for $545K and breaks even from day one (about 50% financially occupied). Of the $420K, I got a loan for $304K, brought in a minority partner for $80K in exchange for 19% equity and spent $36K of my own cash in exchange for the remaining 81% ownership.
Please don't perceive this post as boastful...it is not meant to be. Storage has truly changed my life. I've worked only 20 hours per week for the last year and have actually gotten to see my son (who turned one today) grow everyday... There is nothing special about me and I don't know any magic tricks...AND I'm not selling anything:).....Its just a very strong asset class and I encourage anyone who is interested to delve deeper!!! Best of luck as you forge your own path!
Wholesaling residential properties is earned income - like rehabbing, selling houses retail (as an agent) or having a job. Wholesaling specifically generates one sale, and one chunk of income, and that's it. You have to keep redoing deals again & again for ongoing money. Wholesaling is VERY profitable...I know, as I do it.
Self storage investing is passive income, where you get ongoing checks monthly. Note the ideal situation is to have a manager run it for you and not to work there as a job. I have investigated self storage investing pretty intensively ... and it can be extremely profitable ... especially if you can buy a facility cheap & turn it around, OR develop a new facility...and then keep them for cashflow OR resell them for a capital gain in a couple years.
If you have $250k to $1mm+ in cash and good credit where you can get a loan to buy a self storage facility, I am talking a NICE high profit facility in an urban area - not some small facility or one in a country town - I'd go for it, after doing more research.
If you have less than $250k cash or imperfect credit, I would focus more on wholesaling or residential rentals/rehabs/etc for now
Thank you! This is an excellent breakdown of what I was thinking. I really appreciate your input. I don't have $250k cash right now, so wholesaling may be a better short-term goal, while self-storage could be a longer-term goal.
Thank you! This is an excellent breakdown of what I was thinking. I really appreciate your input. I don't have $250k cash right now, so wholesaling may be a better short-term goal, while self-storage could be a longer-term goal.
Wholesaling is a great way to build up some cash. I've only wholesaled one deal and no longer do residential investing but its a great way to learn a market and build some cash and credibility. Realistically, you will need some cash to get into a "meaningful" storage facility. Meaningful= lose your day job type of facility. But you certainly don't need $250K to buy and profit big time off storage. I own two facilities. The first I bought in 2011 for $350K including closing costs. Got a mortgage and some private funds and my cash infusion was 40K. That facility is now worth $1.4 Million and cash flows around $100K annually. I closed on a second facility last week. Purchase price was $350K plus $50K in repairs and upgrades and 20K in closing costs. Total acquisition was $420K. It appraised as is for $545K and breaks even from day one (about 50% financially occupied). Of the $420K, I got a loan for $304K, brought in a minority partner for $80K in exchange for 19% equity and spent $36K of my own cash in exchange for the remaining 81% ownership.
Please don't perceive this post as boastful...it is not meant to be. Storage has truly changed my life. I've worked only 20 hours per week for the last year and have actually gotten to see my son (who turned one today) grow everyday... There is nothing special about me and I don't know any magic tricks...AND I'm not selling anything:).....Its just a very strong asset class and I encourage anyone who is interested to delve deeper!!! Best of luck as you forge your own path!
Michael-- Thank you! I really appreciate you providing your experience. This gives me a better idea of how a self-storage deal would break down. I will continue to learn. You're an inspiration!
One other question: How does the purchase of a self-storage unit (or any investment property) factor in to your decision to purchase or rent your OWN living quarters? In other words, would you consider it a priority to first buy and pay off your own house, duplex, etc. and then focus on other investment properties? Or, does it depend on your overall financial situation?
@Account Closed I am not looking to brag. I realize I am fortunate I stumbled upon this owner at the exact right time and found a good deal. Part of being fortunate though is being out there, looking, talking to people, because eventually you will talk to the right person at the exact right time right when they were thinking of selling.
In terms of self-storage vs residential there isn't a ton of difference. The lease is typically a month to month instead of for a year, using a different lease style, the main difference is you will have to learn the laws for eviction for non-payment for self-storage in your state. You have to give them a certain number of days notice, you can put your own lock over their unit so they can't access, then you have to advertise an auction and pay an auctioneer to come out and auction off their stuff if they don't satisfy their debts. Other than that you still have to deal with tenants who always have excuses for being late, etc, same as in residential. Just no toilets that can clog or the such that goes along with residential.
Thank you!
I'm also just starting out. I have $20K in cash, and I've been looking at storage facilities around my local area (Utah). I'm looking to focus mostly on storage, but I'm also interested in doing some house flips to help fund my acquisition of more storage facilities. I think house flipping (or in your case wholesaling) is a great way to help get more money to put into self-storage, but there are plenty of self-storage facilities out there that don't require a huge amount of money to get into. Finding a partner is always a great option as well.